by Mr. Om Ahuja,
Jones Lang LaSalle India
The global capital
& currency markets have been
volatile for last the few months, also triggering serious turbulence in the
rupee. Current account deficit and the fact that foreign institutional
investors are selling heavily on the Indian bond market have been the key
triggers for the rupee's repeated depreciation. Factors such as negative export
and industrial growth have triggered even more uncertainty, specifically in the
currency trend pattern.
Will The Rupee
Depreciate Further?
The Central
Government has passed the Food Security Bill, which effectively increases
subsidy for the nation. The fact that the Lok Shabha elections will be held in
in 2014 may be cause for more of such populist measures - nevertheless, the
country’s overall financial status does not look very exciting right now.
We may continue to
see volatility over the mid-term. Moves such as importing of fuel would further
hurt the economy.
NRIs & Real Estate..
When it comes to
Indian real estate, NRIs (Non-Resident Indians)
take centre-stage when the rupee depreciates. The foreign exchange that
they tend to funnel into the sector increases significantly when the rupee
slides. In times of rupee volatility, banks institutions and developers tend to
announce various schemes aimed at attracting NRIs.
At the same time,
NRIs are also attracted to the higher interest rates on NRE (Non-Resident
External) and FCNR (Foreign Currency Non-Resident) deposits, as the standalone
rupee returns look quite lucrative to them.
Paradoxically, data
covering the last two decades indicates that NRIs have, in fact, been losing
out when they funneled their foreign exchange into such accounts during such
volatile times. They have erroneously assumed that they are capitalizing the
rupee's volatility by locking into high yielding deposits.
However, this route
has caused NRIs to miss out on overall capital returns, because the perceived
benefits of high interest rates are actually eroded by the depreciating rupee.
It is therefore wrong for NRIs to assume that
they can garner good returns by locking their foreign exchange into
high-yielding deposit. The reason why more and more NRIs are choosing to invest
in Indian real estate instead is because they are now aware that this is the
only route that assures them of optimal benefits.
As long as they
maintain a broad investment horizon and have chosen their properties well, the
capital appreciation on real estate translates into multi-fold that put all
other asset classes in the shade.
 |
| Mr. Om Ahuja, JLL India |
Traps On The Path For
NRIs..
NRIs have always been
soft targets for hyped-up real estate marketing by developers. The objective of
such marketing is to make NRIs believe that the projects being offered have
been specially created for them - that are not standard offerings on the
market.
Projects being
marketed directly to NRIs are trumped up as the best options that money can buy
in India.
The fact is that most
of these projects are not professionally managed, which has extremely negative
implications for someone who is not physically present in India. Lack of proper
project and facilities management results in accelerated dilapidation of
neglected units, and security also becomes an issue.
There are often no
provisions for paying society dues from abroad. Likewise, NRIs who have made a
sentiment-driven property purchase in their own Indian hometowns often overlook
that paying dues such as property tax online may not be an option in these
locations. The end result is that the property turns out to be a depreciating
and legally compromised money trap.
For these & many
other reasons, NRIs should not give in to sentiments or manipulative marketing
while making a decision on buying property in India. Such decisions need to be
based on sound advice from professionals, with the objective of reaping good
returns on investment.
For NRIs, the Indian
real estate market definitely holds the highest possible investment potential.
However, no such investment should be done on impulse, and it is at all times
advisable to maintain a healthy long-term investment horizon of between 7-10
years.
About the author..
Mr. Om Ahuja, CEO -
Residential Services, Jones Lang LaSalle India
For media contact
Arun Chitnis
Head – Corporate
Communications
Jones Lang LaSalle
India
Level 6, Amar Avinash
Corporate Plaza
Bund Garden Road,
Pune - 411001.
Tel: (020) 3093 0441
Fax: (020) 4019 6101
Mobile: +91 96571
29999
Website:
www.joneslanglasalle.co.in
Twitter:
@JLLIndia_Realty
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